UK back on the road to recovery as economy grows 0.6% in the second quarter

Britain's battered economy is on the road recovery if official growth figures released today are anything to go by.

Total output in the economy, or gross domestic product, saw growth of 0.6 per cent between April and June, according to figures from the Office for National Statistics - double the increase of 0.3 per cent recorded in the first quarter of 2013.

All sectors - agriculture, construction, production, and services - showed progress on the first quarter for the first time in three years, and it is the first time since 2011 that the UK has seen back-to-back quarterly increases in economic output.

Recovery: The UK economy is growing again - with 0.6% the latest figure - but is still below its pre-crash peak

A surprise 0.7 per cent rise in the
third quarter last year was attributed to a bounce-back from a
Jubilee-inspired slump in output.

The outlook has brightened considerably
since the winter, when fears of an unprecedented triple-dip recession
were rife, although economists warned not to get too carried away.

Vicky Redwood of Capital Economics said: 'Even a 0.6 per cent quarterly rise is fairly mediocre after such a deep recession and GDP is still 3.3 per cent below its peak.

'And with households' real pay still falling, bank lending flat and public sector austerity measures building, the economy may struggle to maintain its recent rate of growth in the second half of this year.

'Nonetheless, evidence is building that the economy is gradually getting back on its feet.'

The Bank of England under new governor
Mark Carney recently reassured markets that
interest rates would remain low for some time to support the ailing
economy.

And Philip Shaw of Investec said that even today's data might not divert the Bank from easing monetary policy further.

'Any coming announcement is likely to include the issuance of forward guidance,' he said, 'but we also consider it likely that the bank additionally announces more QE or perhaps ‘other options’ (which it said it was looking at in its July meeting minutes), as it pursues the elusive "escape velocity", seeking to move the UK more quickly back to its pre-crisis peak.'

All sectors grew in the second quarter compared to the previous quarter - for the first time since the third quarter of 2010.

Indicators of real recovery have gathered momentum since the 0.3 per cent GDP increase in the first quarter was announced.

Unofficial surveys have suggested continued improvement, while revisions to ONS data
revealed that the double-dip recession from 2011 to 2012 never happened.

Yet the revisions turned out to be
double-edged, confirming that the initial recession following the
financial crisis was far worse than first feared. It meant the economy
was still 3.9 per cent below its pre-crisis peak - with the gap
previously thought to be 2.6 per cent.

Today's figures show overall
GDP is now 3.3 per cent below the peak, with production 13.4 per cent
off and construction still a hefty 16.5 per cent down. The powerhouse services sector, which represents three-quarters of the economy, represented the bulk of the second-quarter GDP increase, as it expanded by 0.6 per cent.

Within this area, business services and finance rose 0.5 per cent after slipping back in the first quarter - with architectural and engineering activities making the strongest contribution. Hotels, restaurants and distribution also contributed to the services improvement, growing 1.5 per cent.

Gains in the beleaguered construction and manufacturing sectors, still well below their 2008 peaks, will be especially welcome. Construction, boosted by Government initiatives to stimulate home buying, rose 0.9 per cent after falling 1.8 per cent in the previous quarter.

The services sector made by far the biggest contribution to overall second-quarter growth.

Manufacturing also saw a turnaround
in fortunes, picking up 0.4 per cent after a 0.2 per cent fall last
time. It contributed to an overall increase in the production sector of
0.6 per cent.

Doubts remain about the strength of
the recovery, with fears over risks posed by the turbulent eurozone and
the consumer-led nature of the economy's progress.

Officials at the International
Monetary Fund have increased the ambivalence, raising their forecast for
annual growth from 0.6 per cent to 0.9 per cent, but later issuing a
gloomy analysis of the UK's prospects.

In
a recent report, the IMF said the recovery remained 'slow and fragile'
with output expected to remain well below par for an extended period,
and some of its economists suggesting the sluggish pace of growth could
undermine the coalition's deficit-slashing policies.

Up and down: UK GDP growth has switched between positive and negative three times in the last two years.